SUPPLY CHAIN MANAGEMENT
lm, Sept. 98

Plan
====

I-   Definitions & Context
II-  Supply Chain complexity; Supply Chain Management objectives
III- Solutions & Tools
IV-  CHAIMS and Supply Chain Management



I-   Terms & Context definitions
================================

A Supply Chain is the representation of the successive transformations
a product goes through in manufacturing. A product is nothing else than a
physical entity (a car, an antenna, a fork, a mother board, a PC,...) which
is to be sold as a final product or as a part of another product. A
transformation can be anything related to the product itself or to how it
is dealt with; examples of transformations are a change in the product
composition (adding of a part) or a change in its location (product moved
from point A to point B).

Below is a simple supply chain:

     -----------               -----------               -----------
    |           | ----------> |           | ----------> |           |
    | Company X |             | Company Y |             | Company Z |
    |           |<============|           |<============|           |
     -----------               -----------               -----------


-->: information and financial flow (quantity, date, money)
==>: physical flow (products)

In today's manufacturing, most of the companies are outsourcing (they
don't manufacture all parts themselves but ask other companies to do it).
This grandly increases the physical flow occurring between manufacturers:
this flow represents most of the whole flow, it can vary from 70% to
more than 99%. One can guess how important the control of this flow is and
how it impacts on the added value of a company's business.

Supply Chain Management consists in controlling and optimizing this flow
by managing the supply chain. Taking the example of Company Y, they will
have to make sure that they:
- get the necessary information from Company X (i.e. how many pieces are
  ordered, for when, when will the payment occur, how much will it be, etc.)
- transmit the necessary information to Company Z in order to get the
  necessary parts
- receive all the parts in time from Company Z
- assemble them if needed
- transfer the parts (assembled or not) in time to Company X
- get paid by Company X
- pay Company Z. 


II-  Supply Chain complexity; Supply Chain Management objective
===============================================================

1. Supply Chain complexity:
---------------------------

a) A better example:

The chain above is quite simple. In reality, it is far more complex since
it involves a greater number of companies and a greater number of flows
between these companies. Indeed, let us consider a more complex example.

Let's have 2 computer companies which both sell PCs: CompA and CompB.
They buy parts as monitors, mother boards, etc. in order to assemble PCs
before selling them to their customers. Let's do the following assumptions:
- we will consider the mother board (MB) part only
- CompA and CompB get their parts from different suppliers
- the mother board suppliers (MBS1 and MBS2) do get the processors from the
  same supplier, e.g. Intel.

Here is the diagram corresponding to the situation above:


                                                 
                                            (MB) 
               (Processor) |-------- MBS1 ------- CompA
       Intel---------------|
                           |-------- MBS2 ------- CompB
                                            (MB)
                                                
                              
CompA and CompB have both the same ultimate objective: sell PCs and make
money. Intel, MBS1, MBS2 have the same objective as CompA and CompB but
selling parts instead of PCs.


b) Different strategies to deal with:

It is very common that companies do not have the same strategy
towards the customer. Let's assume the following regarding CompA and
CompB:
- CompA sells PCs whose configuration exactly corresponds to the
  specifications given by the customer when he/she makes an order
  (processor Intel Pentium Pro, 32M of RAM,...). CompA will satisfy the 
  customer, though asking for a delay needed to assemble the corresponding
  parts. CompA will always have a null stock of parts/PCs but will expect
  its parts suppliers to be very reactive.
- CompB sells PCs depending on the availability in stock. They do not want
  to assemble new PCs according to the individual demand. This means that
  they will always have a lot of "already built" PCs in stock and won't
  expect a lot of reactivity from their parts suppliers. They do not show a
  lot of flexibility towards the customer though.


c) Impact on the suppliers:

- MBS1 and MBS2:
  MBS1 has to be flexible in order to satisfy CompA's orders. In the case
  of CompB, MBS2 has fewer constraints: they have to supply CompB at the
  deadline specified by CompB itself, which is a fixed deadline. This is
  different from CompA's situation where MBS1 has to forecast customers'
  requests to CompA. The responsibility of any forecasting error lies on
  MBS1 for CompA whereas it lies on CompB for CompB.

- Intel has to deal with both suppliers and both kinds of constraints. 
  Intel has to make sure they produce enough processors in order to supply
  both MBS1 and MBS2. Nevertheless, the production should not exceed what
  would be needed because of today's "moving-fast" technology (indeed, one
  can not keep in stock old products which won't be bought anymore when new
  ones arrive in the market).
  Intel has therefore to integrate two orders variables: one predictable
  (MBS2's order) and one which is not (MBS1's).


d) Conclusion:

A new value comes up here: Supply Chain Management does not only consist in
controlling input, output and processes within one company but aims at
making sure that these are coherent and optimized all over the chain,
i.e. considering all companies involved in the whole process.

One can easily imagine what this becomes if we add more customers, more
products, more parts, and more suppliers...


2. Supply Chain Management objectives:
-------------------------------------

The objective of Supply Chain Management is to control and optimize the
whole flow of products going through the supply chain in order to:
- be reactive to the market (put a product in the market before the
  competition does, and as soon as the customer requests it)
- be "time to market" (no new products too soon)
- sell at low cost
- be flexible.

Note: Each company gives its own priority to each of these objectives.
This makes the chain ever more complex as it impacts on the companies'
strategies.


III- Solutions & Tools
======================

The input information for the supply chain consists in customers' data,
ordered quantities, products locations, due dates, quantities in stock,
delays, etc. These constraints must be integrated in order to output the
optimal solution; this will include information as: how many parts of each
reference to order, at which frequency, at which maximal price, including
which flexibility, etc.

Some tools do exist to facilitate such integration and planning. They also
allow adaptability in case of changes.
- Tools acting at the enterprise level are mainly products of SAP, Bann,
Oracle and PeopleSoft; they are called Enterprise Resource Planning (ERP)
tools and control the "4M" information within the company: Material, Manpower,
Machinery and Money.
- Tools at the supply chain level are called Advanced Planning Systems;
they are optimization tools which very quickly allow to run simulations
(on average of 1/2h) and output an optimal result. Examples of APSes are
products of i2, Manugistics, and Paragon. They allow integration of data
as huge and diversified as described below:
        
        23 sites of production worldwide
        10 systems of ERP       
        200 customers worldwide
        4000 suppliers worldwide
        400 000 parts references
        15 000 customer products references
        and several delivery modes.
        
This is a set of data taken from an example of company which mainly
assembles mother boards.

Besides such integration of information, communication and transmission
of information between the different actors of the chain are critical
in Supply Chain Management. It must be done real time (as companies
must be reactive) and without any modification of the information
(since such modification can be amplified along the chain). No
existing tools help fulfilling these two points. BroadVision Inc.
uses the Internet and the World Wide Web to make the information
more visible (see "One-To-One" Products at http://www.broadvision.com).


IV- CHAIMS and Supply Chain Management
======================================

CHAIMS system has the ability to process and optimize a supply chain. The
design of a supply chain system, the benefits of using CHAIMS, as well as
the current issues in the design of such a system are described below.

1. Design of a supply chain with CHAIMS:
---------------------------------------

- each company's services as bid request, order, cancellation,
  deliver, etc. would be represented by a megamodule's service (method)
- the input of one megamodule's service invocation (e.g. order) would 
  include some information to be transferred to another megamodule 
  for the next service to be requested (e.g. deliver)
- a megaprogram would compose the processes and control the flows at
  each site, making sure necessary data are sent to corresponding
  sites.

2. Benefits of using CHAIMS:
---------------------------

- the information could be transferred from one megamodule to another
  without being modified (except for taking subset of the data or 
  completing it)
- the information would be transferred immediately
- the information received from various megamodules could be merged
  automatically for control and optimization (adjustment of number
  of ordered parts for instance)
- estimations of specific services could be obtained from different
  suppliers before making a decision
- estimations of the "reply time" or "cost" of an invocation (i.e. 
  service request) could be obtained as well, allowing restriction of
  the space of invocations. Example: bids for the next day won't be sent
  to suppliers which will take more that a day to reply. This implies
  gain of time and money.

Conclusion:
At each stage of the chain, decisions would be easier to make, would
take less time, and would be optimized and more accurate.
3. Current issues:
-----------------
A megaprogram will invoke megamodules which themselves will want to
invoke other megamodules. Therefore, a megamodule should be able to act
as a megaprogram. This is not possible with the CHAIMS system as it is
now: the current CHAIMS client-server architecture does not allow clients
to behave as servers as well.
4. Example:
----------
An example of a supply chain implemented using the CHAIMS system will
follow soon. It will be a "first-level-hierarchy chain", which means
that we will avoid having a client behave as a server. Future work
will find a solution to this architecture issue.
For now on, the example which will be implemented is as follows:
CompA orders a specified quantity of monitors from MS, of cases from
CS and mother boards from MBS. This order is given with complementary
information as a maximal price for each part and a delivery date.
CompA will also ask Intel to deliver processors to its mother board
supplier, MBS.